The TJX Companies, Inc. Price & Performance (TJX)

Thank you. And now I'll turn it back over to Ernie.

Good morning. Joining me and Deb on the call is John TJX, I want to first take a moment to share our care and concern for everyone affected by the wildfires in California. While many of our associates were affected, we are grateful that they are all safe. We have offered resources to our associates and also made emergency donations to World Central Kitchen, and the Los Angeles Los Angeles Regional Food Bank, to help provide support for people who most need it. Now to our business update. I am very pleased with our outstanding fourth quarter. Our 5% was driven by strong consistent comp increases of 4% or above at each of our divisions. Further, our comp sales growth across all of our divisions was once again driven by an increase in customer transactions. Clearly, our great values gifting assortment and freshness of our mix resonated with our shoppers during the holiday season. For the full year, overall sales surpassed $56,000,000,000 and we opened our five thousandth store a milestone for our company. I want to recognize the excellent execution across our company, which led to our above plan results. Full year comp store sales growth of 4% a significant increase in profitability and a double digit increase in our earnings per share were all above our guidance for the year.

We are confident that we continue to attract new shoppers in every country we operate in and that there are plenty of opportunities to further grow our customer base going forward. I want to thank all of our global associates for their excellent work in 2024. I am extremely grateful for their continued dedication and commitment to TJX and to our customers every day. As we begin 2025, we are excited about the opportunities we see in our business and have many initiatives planned that we believe will further drive sales and traffic to our stores and online. Availability of merchandise is fantastic and we believe we are in a great position to execute on our merchandising plans and keep delivering our shoppers outstanding values on great brands and fashions throughout the year. I'll turn the call over to John to cover our results in more detail. Thanks, Ernie. I also want to add my gratitude to all of our global associates for their hard work and commitment to TGX this year. Moving to our results. As a reminder, last year our fiscal calendar had an extra week in the fourth quarter, Therefore, where applicable, we'll be referencing adjusted numbers for last year's results, which exclude the impact of that extra week.

Now I'll share some additional details on the fourth quarter. Net sales grew to $16,400,000,000 a 5% increase versus last year's adjusted sales. As Ernie mentioned, our fourth quarter consolidated comps sales increased 5% which was well above our plan and driven by an increase in customer transactions. We were very pleased to see strong comp sales increases in both our overall apparel and home categories. Pre tax profit margin of 11.6% was up 70 basis points versus last year's adjusted 10.9%. Our pre tax profit margin was 70 basis points above the high end of our plan. This was primarily due to a benefit from lower shrink as well as expense leverage on our above plant sales, partially offset by higher incentive compensation accruals. Gross margin was up 100 basis points versus last year's adjusted 29.5%. This was primarily driven by a benefit from our year end true up of shrink expense and strong mark on. SG and A was 19.2%, up SG and A was 19.2%, up 30 basis points versus last year due to incremental wage and payroll costs. Net interest income was neutral of pre tax profit margin versus last year. All this led to a diluted earnings per share of $1.23 up 10% versus last year's adjusted 1.12 and also well above our plan.

As for our divisional performance in the fourth quarter, we saw strong comp store sales growth at every division. All driven by increases in customer transactions. We were particularly pleased with the outstanding sales performance at our international division with TJX Canada comp with TJX Canada's comp sales increasing 10% and TJX International comp sales 7%. Now to our full year fiscal twenty twenty five results. Net sales grew to $56,400,000,000 a 6% increase versus last year's sales. Consolidated comp store sales were up up 4%, entirely driven by customer transactions. Pretax profit margin of 11.5% was up 60 basis points versus last year's TJX 10.9%. Gross margin was 3030.6%, up 70 basis points versus last year's adjusted 29.9%. This increase was driven by strong mark on lower freight costs and 20 basis points from shrink favorability, partially offset Regarding shrink, we saw favorability across all our divisions. I want to take a moment to acknowledge that late great collaboration and tremendous efforts of our associates who worked extremely hard on our initiatives throughout the year.

SG and A was 19.4%, up 10 basis points versus last year's 19.3%. This was due to incremental store wage and payroll costs. Net interest income was neutral to the full year pre tax profit margin versus last year. All this led to a full year earnings per share of $4.26 up 13% versus last year's $3.76 Ernie will talk about our full year divisional highlights in a moment. Moving to inventory. Balance sheet inventory was up 8% and inventory on a per store basis was up 1%. We feel great about our inventory levels and the outstanding availability we're seeing in the marketplace. We are well positioned to flow fresh assortments to our stores and online this I'll finish with our liquidity and shareholder distributions. For the full year, we generated $6,100,000,000 in operating cash flow and ended the year with $5,300,000,000 in cash. In fiscal twenty twenty five, we returned $4,100,000,000 to shareholders, through our buyback and dividend programs. Now, I'll turn it back to Ernie. Thanks, John TJX. I will pick it up with some full year divisional highlights. I am extremely pleased with the consistency of our sales performance across our divisions. Each business delivered comp store sales growth of 4% or above importantly, the sales were entirely driven by an increase in customer transactions.

We believe this highlights the strength of our value proposition our ability to gain market share and the power of our wide customer demographic. At Marmaxx, overall sales for the full year exceeded $34,000,000,000 and comp store sales increased 4%. Marmaxx's apparel and home categories both saw comp sales increases. Additionally, comp store sales increased across all of Marmaxx's regions and income demographics. At Sierra, which is reported with Marmax, we were very pleased with their strong performance for the year. As to profitability, full year segment profit margin increased to a strong 14.1%. With more than 2,500 total TJ Maxx and Marshalls stores today, we still see plenty of opportunities to open new stores attract more shoppers and further grow our sales. At HomeGoods, annual sales grew to $9,400,000,000 and comp store sales increased 4%. During the year, we opened our 1,000 store for this division a great milestone. We were very pleased to see this division's segment profit surpass $1,000,000,000 and see its margin return to double digit levels at 10.9%. We are by far the largest off price home fashion and we continue to see plenty of opportunities to capture additional market share with both our HomeGoods and HomeSense banners.

At TJX Canada, full year sales increased to $5,200,000,000 and comp store sales were up 5%. It was great to see consistent performance at all three of our Canadian retail banners, which each delivered similar comp store sales increases. Segment profit margin on a constant currency basis was 13.5% As Canada's leading off price apparel and home fashions retailer, we believe our winners Marshalls and HomeSense banners are all on track for continued successful growth. At TJX International, full year sales exceeded $7,000,000,000 and comp store sales increased 4% with strength in both Europe and Australia. As to profitability, I am very pleased with this division's improvement in 2024. Segment profit margin on a constant currency basis was 5.8%. In Europe, we continue to grow our footprint in our existing countries and announced our plans to open our first stores in Spain in calendar twenty twenty six.

In Australia, comp store sales growth was out outstanding and we continue to expand the reach of our TK Max banner across the country. Long term, we are confident that we have opportunities to capture additional market share in each country that we operate in. At the e commerce, overall sales increased and we added new categories and brands to our assortment across our sites to further enhance our online treasure hunt shopping experience. Okay, moving on, I'd like to highlight the key differentiators of our business give us great confidence in our continued successful growth around the world for many years to come. First is our value leadership in The United States, Canada, Europe and Australia. We believe that our relentless focus on value every day through a combination of brand fashion pricing quality we'll continue to resonate with shoppers. Second, is our very wide demographic. We want to sell everyone and believe our offerings are across good, better and best brands appeal to shoppers across most income and age demographics. Third, we believe we have one of the most flexible business models in retail. This allows us to buy close to need and adjust our selections as macro trends and consumer preferences change.

Next is our differentiated treasure hunt shopping [indiscernible] driven by our rapidly changing assortment. Our stores receive multiple deliveries a week of fresh branded merchandise to surprise and excite our customers. We believe this can inspire shoppers to visit us more frequently to see what's new.

Beth, is our world class buying organization. I believe the depth of experience among our 1,300 plus buyers around the world is unmatched and that we have the best vendor relationships in retail. Our merchants source from an ever changing universe of over and from more than 100 countries. Further, we continue to see a significant opportunity to grow our global store base We are increasing our long term store potential to a total of 7,000 stores or over 1,900 more stores in just our existing and announced geographies. This now reflects the long term potential for HomeGoods to expand to 1,800 stores Sierra to expand to three twenty five stores and our base in Spain to grow to 100 stores. In addition to our future store growth opportunities, I want to reiterate my excitement for our newly formed TJX venture with Grupo Waxo in Mexico and our recent investment in Brands for Less The Middle East. We see both of these as a great way to participate in different areas of the world.

Lastly, I am so proud of our culture which I am convinced is a key component of our success. We continue to invest in teaching and training to develop the next generation of TJX leaders. Turning to corporate responsibility. We are excited about the progress we have made over many years On our conference calls over the past year, I've shared updates on how we support our associates and communities. Our work to mitigate our impact on the environment, and our commitment to operating ethically. Today, I'd like to share more about some of the remarkable efforts our TJX foundations and associates made this past year to have an impact on the communities where we live and work. In addition to the support I mentioned earlier for people affected by the California wildfires, in 2024, we also helped with the relief efforts for those affected by hurricanes, in the Southeastern United States and flooding in Austria and Poland Further, supported more than 2,500 nonprofit organizations globally through our TJX Foundations. A Associates across the globe play an important part in this meaningful work by volunteering, running donation campaigns in our stores participating in our associate nominated grants program and more.

These are just some of the examples of work our teams are doing in our communities and we invite you to visit tjx.com to learn more. Before I close, I want to emphasize that our primary focus remains our value gap versus traditional retailers. I am very confident at the key strength and flexibility of our business will allow us to navigate through the current China tariff environment. Just as we have successfully navigated through many other and our nearly fifty year history. In closing, we feel great about our strong performance in 2024. We are confident in our plans for the year and as always, we will strive to beat them. Longer term, we remain laser focused on growing our business and are convinced that we can internationally. When I look at our growth opportunities ahead, the globalness of our business, our deep talent base, our wide customer base and the consumers continue to desire for value I am very excited about the future of TJX TJX. Now I'll turn the call back to John to cover our full year and first quarter guidance.

And then we'll open it up for questions. [indiscernible] Thanks again, Ernie. I'll start with our full year fiscal twenty twenty six guidance. We're planning overall comp store sales growth of 2% to 3%, Starting in fiscal twenty twenty six, our comp store sales will include e commerce sales are a small piece of our total business. We do not expect e commerce to have material impact in our comp sales growth. For the full year, we expect consolidated sales be in the range of $58,100,000 to $58,600,000,000 up 3% to 4% TJX. We expect favorable foreign exchange rates to have a 1% negative we expect unfavorable foreign exchange rates to have at one a 1% negative impact to consolidated sales growth. We're planning full year pretax profit margin to be in the range of 11.110.4%, down 10 basis points versus last year's 11.5%. This guidance assumes a 20 basis point negative impact due to the unfavorable foreign exchange rates in transactional FX. Moving to our full year gross TJX. We expect it to be in the range of 30.4% to 30.5%. This would be down 10 to 20 basis points versus last year's 30.6%. Due to unfavorable transactional foreign exchange and inventory hedge.

We're also planning for a slight improvement in shrink. We are expecting full year SG and A to be nineteen point three percent ten basis points favorable to last year's 19.4%, driven by a benefit from the annualization of last year's higher and planning net interest income of $98,000,000 dollars margin by 20 basis points. We're currently assuming a full year tax rate of 25.1% and a weighted average share count of approximately 1,130,000,000.00 shares. As a result of these assumptions, we're expecting full year diluted earnings per share to be in the range of $4.34 to $4.43 up 2% to 4% versus last year's $4.26 a 3% negative impact to EPS growth due to unfavorable translational and transactional foreign exchange. Lastly, our fiscal twenty twenty six guidance assumes a small negative impact in the first half of the year from the current China tariffs on merchandise that we were committed to when these tariffs went into place. We have a great team. We have seen tariffs before and we are confident we can navigate our way through the current China tariff environment on our future buys.

Moving to first quarter, we expect overall store sales to increase 2% to 3%. While weather was not favorable to the start of the quarter, we have been pleased with what we've seen recently as weather has normalized. We expect consolidated sales to be in the range of $12,800,000,000 to $12,900,000,000 pretax profit margin to be in the range of 10% to 10.1% down 100 basis points to 110 basis points versus last year's 11.1%. Gross margin to be in the range of 29.8% to twenty nine point nine percent twenty last year's 30%. This is primarily due to unfavorable inventory hedges. SG and A to be 20%, up 80 basis points versus last year's 19.2% This is primarily due to incremental store wage and payroll costs and the lapping of a one time benefit last year. Net interest income of $27,000,000 which we year over year pre tax profit margin by 20 basis points. Tax rate of 23.2% and a weighted average share count of approximately 1,130,000,000.00 shares. As a result of these assumptions, we're expecting first quarter diluted earnings per share to be in the range of $0.87 to $0.89 versus last year's diluted earnings per share of $0.93 want to mention that there are several factors causing our first quarter pre tax profit margin and earnings per share to be planned lower than the remainder of the year.

This includes a benefit from lower incentive compensation accruals planned in the last nine months of fiscal twenty twenty six. The lapping of a benefit from a reserve release in the first quarter of last here and the expected timing of certain expenses. Importantly, this first quarter guidance implies that the last nine months of the year, we expect pretax profit margin to be flat to up 10 basis points and earnings per share to be up 4% to 6% versus last year. Moving to our fiscal twenty twenty six capital plans. Expect capital expenditures to be in the range of 2.1 to $2,200,000,000 This includes opening new stores, remodels, relocations, as well as investments in our distribution network and infrastructure to support our growth. For new stores, we plan to add about 130 net new stores, which will bring our year end total to over 5,200 stores. This would represent a store growth of about 3%. [indiscernible] 40 net new stores at Maramax 30 stores at HomeGoods, including nine HomeSense stores, At Sierra, we plan to add about 20 stores. In Canada, we plan to add 12 stores and at TJX International, we plan to add 22 net stores in Europe and six net stores in Australia.

Lastly, we also plan to remodel about 500 stores and relocate approximately 40 stores in fiscal twenty twenty six.

As to our fiscal twenty twenty six cash distribution plans, we remain committed to returning cash to shareholders. As we outlined in today's press release, we expect our Board will increase our quarterly dividend by 13% to $0.425 per share. Additionally, in fiscal twenty twenty six, we currently expect to buy back $2,000,000,000 to $2,500,000,000 of TJX TJX. In closing, I want to emphasize that we are in an excellent position both operationally and financially to take advantage of the opportunities we see to further grow our business, while simultaneously returning significant cash to our shareholders. Now we're happy to take your questions. As a reminder, please limit your questions to one per person so we can answer as many questions as we can. Thanks. And now we'll open it up to questions.

Thank you. We will now begin the question and answer session. Our first question comes from Paul Lewis Hey, thanks guys. If you could talk about what drove the stronger performance in Canada and international, if there's anything that changed in the macro that you think worked in your favor or was it simply better execution? And also curious if you expect those businesses to continue to outperform this year? Sure, Paul. Yes, obviously, very pleased with both Europe and Canada.

And common denominator with both of them was the way we flow first of all, you're in gift giving time period in Q4. And you know we've typically done well in Q4 These two divisions specifically executed a flow plan in terms of how late they shipped freshness in prior to Christmas. That it was extremely beneficial to their pre Christmas, the ten days before Christmas time period and this applies to both Europe and to Canada.

And then even the post Christmas business and both was exceptionally strong. So I give them a lot of credit on that as well as what they did in addition to going after specific gift categories, which I think was a big improvement in owning those and more depth versus the prior year. It was the balance of good, better, best across the board in Europe and in Canada as well. They also both had healthy home businesses. Which helped help their total because as you know home spikes in Q4. And we have certain categories there that are great gift gaming categories. So I think there was a bit of a tactical execution benefit from the wet they flowed and then a mix advantage in both. By the way, it applies to both of them. Thanks for the question. We were very pleased with both of those divisions.

Yes. And Ernie, you expect them to continue to outperform? And then I guess on the related note Yes, Paul.

Yes, yes, we've seen both of them continuing to very happy with the way they've been performing. And they both have really some seasoned management across those areas that gives me a lot of faith between our over there they call it merchandise between our planning and allocation area as well as all our head merchants, We have a lot of seasoning there and people that have gone to some of the new key roles starting about two years ago that I think is going to set them up I think for strong execution over the next year.

Yes. Thank you, Paul. Great question.

Our next question comes from Lorraine Hutchinson Bernie, I wanted to ask about I wanted to ask about customer behavior on both ends of the spectrum. Are you seeing trade down at the higher end? And then at the lower end of the assortment, how are customers reacting to some of the sharper price value offerings? Yes. So So it's hard for us to really measure on that because part of our success and again, this was a an extremely pleasing quarter for us to have every division running a four or better when you have Canada at 10. By the way, the other thing to remember is we were up up against a good quarter the year before in Q4.

So So it becomes tough to measure on the good, better, best, so to speak or the demographics on income because we were pretty much performing at every level across banner that we have. And we did see when we look at our and again, this is where stores are the store performance in different demographic areas, We saw Nice increases in both are below 100 and above 100 income demographic areas. And I think Lorraine, part of the evening off that happens is with the and you've seen a lot of the write ups. So you have I know consumer comps is down a little and you have store closures in different pockets of retailers across The U. S. Canada as well by the way, Europe as well. And when you have so you can the reason it's tough with all that noise is because obviously in some of those cases we're picking up the market share. Home would be one of the more obvious ones where either business that had a home business as part of it or home only have [indiscernible] And so there's almost not a demographic issue there, more of a category market share gain, which has been more with John and I would see in the divisions as we have gained market share not where it's easier to measure is not by income demographic, just across all the income demographics, but in certain categories, we have outpaced.

Thank you.

Welcome.

Our next question comes from Matthew Boss Great. Thanks and congrats on another nice quarter. Thanks, Matt. So two part question. First, on the continued strength in transactions across divisions that you saw in the fourth quarter, Maybe could you elaborate on new customer acquisition trends just how Ernie would you rate the breadth of your product assortment and value proposition into the spring just near term, could you maybe elaborate on the more recent trends you've seen in the business or is it fair to say that you haven't really seen any change in underlying business momentum if we parse through the impact of weather?

Okay. Yes, Matt, great questions. I was So John, TJX you want to talk to the transaction and then I'll talk to the breadth of products and the positioning. We've seen again, we continue to see strong trends transaction growth and we are seeing us attracting more customers to our stores.

And when we look at the age TJX, they tend to skew a little bit more towards that 18 to 34 age TJX is what we've seen consistently. So we're quite pleased to see the sales growth based on again more customers coming to our stores. Which ties in, I think Matt, with the other part of your question, the breadth of product, because obviously, we're conscious about continually expanding our well, our vendor base, our category of items base. Probably HomeGoods is one of the I would say would be the epitome of that in terms of how we are always opening new vendors and new categories. We do it in every division. They just jump out where it's a little more obvious when you walk the store because you'll find items in categories that are now expanded versus a week before in a very dramatic fashion. So I would say our breadth of product as we go into spring is, I would say, kicked up a notch from even last year. Again, that's part of our success this past fourth quarter and in the last couple of years is to continually try to bring in new vendors and new product categories while not alienating customers or category purchases on the other side of it, which is one reason we're always talking, I'm always talking about trying to sell as many people as possible.

That was in our script. That's what we always talk to. You got, I know we've talked many times about it. So our breadth of we line up our plans for spring and in very wide product breadth, vendor breadth, Having said that, when you started to get other than the weather, issue, which John TJX, when the weather was in the areas where it was normal weather, we were pleased with how we were performing. It's just we had those pockets of weather that hit us on those spots. But again, we're feeling very good about the normal weather pattern areas and where we'll head in the future. So I don't know if I did I answer that about the product breadth?

Yes, you did. Ticked up a notch relative to a year ago.

Yes. I have a direct quote on that. That's very good. Thank you. Best of luck. Thank you, Matt.

Our next question comes from Brook Roach Good morning and thank you for taking our question. I was hoping we could elaborate your expectations for continued expansion in merchandise margins Can you contextualize what you're embedding in your outlook for merch margin expansion as you contemplate mark on versus tariffs? And then John, on gross margins, can you speak a little bit more about your expectations for shrink for the year?

Thank you.

So let me so Brooke, I'll start off with the our approach on the mark [indiscernible] Touch on tariffs briefly in there and then John can pick up on the on the actual components financial components. I thought we would talk about this to really try to keep it crystal clear on our approach how this works. First of all, on the tariff situation, it's been a little gray. There's a short Tom keep in mind that The direct imports for China for us are extremely small percentage of our business. And so although the could be like in the short term a little bit of a perhaps a little bit of a cost associated there, Over the medium and long term, that really doesn't become the issue because of the way we approach our buying. So to give you an example, I guess the silver lining is with consumer confidence down and a bit of a rocky environment out there, And the way our buyers operate, which is the buyers go out and they really assess it the retail level what we can retail product for and then they work at backwards. To what the cost should be and they really don't their strategy is not to factor tariffs or any other costs that actually can play into the picture here The way they approach is they're going to look at what's the out the door like item and we need the gap in retail they're out the door that's going to provide the amazing value for our consumer.

And from there, they work on the caustic it's really not up to them to have to worry about what the vendor is getting caught up with in terms of tariff or inflation or other costs because remember we've been to the movie before recently a few years ago with extreme inflation and we navigated right through that TJX as we will on this. It's just it's a different headline. It's just the same approach. So whether there's tariffs, no tariffs, our buyers really their focus is on buying the goods, determining the cost based off the retail can put the goods out at.

So because of the environment we're in where there's a lot of, I think, consumer confidence stores closing, etcetera. I'm thinking there's more availability out there over the next six months even more than there's been which is going to create more buying opportunities for our teams. So back to your margin with that.

That at a high level, I think plays into our ability to look at TJX opportunities. I'll give you another thing is we mentioned this briefly. Is the wide demographic which I've talked about a couple of times. That also plays into our ability to be more flexible So if our buyers or merchants don't see something in one vendor or one good, better, best TJX, they can always be more flexible in terms of the way they handle the market. They can move from a good item to a better item if that's where the better buy is. And I think we have that advantage versus most of our competition doesn't have that flexibility.

So again, great question. Where I'm excited about this I'm excited about the sales and margin opportunity in this environment because this is pretty much textbook situation coming up here.

Right. And then Brooke, to answer your question on the shrink, we're very pleased with where our shrink rates came in this year.

We are we still have our shrink committee We're still staying very focused on this. So we do have a small improvement baked in to our plan this year and it's really centered around the annualization of the initiatives. That from last year, but we're also at this point analyzing data on the shrink results and we will use that data to lean into some of things that worked last year.

So we're doing a number of things.

Again, the the overarching strategy is to is to continue to to maintain a great shopping environment as well.

Great.

Our next question comes from Michael Binetti Hey guys, congrats on an awesome quarter. I'm very happy to see it. Thanks, Mike. [indiscernible] John, I ask you this a lot, but flow through for the year on a two-three comp is 10 basis [indiscernible] if we exclude the currency I'm guessing that's with less of a lingering contribution from some of those snapback COVID areas like freight and shrink and even your market a little bit for tariff this year. Is 4% still the long term leverage point? Is there anything changing there? And then I just want I'm just curious on real estate availability. In The U. S. When we speak to some real estate brokers recently, they said new development is is almost nothing. So there's a lot of competition for boxes from the retailers that go bankrupt. I'm curious if you see any tightness in the availability of real estate in The U. S. Either if you're getting your boxes in or any reason to think that there could be some rent inflation in the years ahead if those dynamics Yes. So on the flow through, yes, we the model still stands where on a 3% to 4% comp with no outsized expense increases, we would expect to be flat to up 10 basis points.

But again, that's it over arching model. If we see years where we have an opportunity to do better than that, we certainly will bake that into our plans. As far as the real estate availability, so we do see a lot of availability going forward. As we've talked about in the past, We do see an opportunity to expand into some more rural areas where the department store of the area closes and we can fill that void and that those areas. Also, you're still seeing large box closures that we have the opportunity to either go into a new area or to relocate a store to a better shopping area. So, again, we still see opportunities That's kind of reflected in the increase to our sales or our store potential Thanks a lot guys.

Thanks. Our next question comes from Chuck Grom. [indiscernible] great quarter. Ernie, can you talk about the 5% comp in the context of category performance across apparel, home, footwear, accessories and gifting? And then when we look ahead to 2026, how you're planning those businesses across those categories? And then for John TJX, on the shrink rate improvement, can you just remind us where you're shrink or cool levels actually are today relative to 2019, so we can get a sense for how much is left to continue to improve on that front? Yes, Chuck, obviously, I can't give specifics on some of these categories, but directionally, I can talk to well, we were with that strong comp, we were up in apparel and home, but I would say the home and some of our accessory business and that would be a similar way that we're looking for those businesses to perform [indiscernible] If you start getting into some of the smaller category breakouts, that's the information. We just don't give those specifics out there. But directionally, obviously, when you run a five, you have to have pretty decent apparel business also. Otherwise, you can't offset it because it's still a significant percentage of our business.

The business I continue to be even more bullish on is our home business in total. As you know, it's kind of a third plus of TJX. And if you look at the home domestically here in The United States and you look at how home goods has performed versus the industry, I think that's a great sign And if some of the other new housing starts and interest rates TJX to be more favorable, look at how our teams there are performing now and think that could even be more potential up for us. So that's why we're very bullish on home. We're the only ones that do it the way we We do it. And that team specifically what's neat on the way our home business is done, which not many people think about this, There's been discussion on tariffs at China, etcetera. We actually our priority on our home business is to do goods out of Europe. Because that is a differentiator for us and it creates an umbrella of fashion and brand and quality that, other home retailers don't do. So one reason it performed extremely well in Q4 in our home business. And that whole Europe piece of differentiation I think is going to help propel us going forward.

And by the way, Europe and some of our other accessories categories that I was talking about where we performed better than the store I think we utilize it there also as an offensive sales driver and customers love that piece of our mix. So that is a highlight I can talk about and we have that plan to be big going forward. John? Yes. So Chuck, on your question about the shrink rate, we don't publicly disclose our shrink rate. But But going forward, we still think we have some Thank you.

Our next question comes from Alex Staten Thanks.

This is Chad Burtnell on for Alex.

My question is on segment margins. You closed the margin gap between HomeGoods and Marmont TJX.

Max quite a bit in the back half of 2024.

So with this recent move lower in ocean freight rates and home goods higher exposure there, it seems like the setup to close that gap even further in 2025 pretty favorable. Is there anything structural keeping home goods from running at or close [indiscernible] color you can provide around the moving pieces of margin in both segments of 2025 would I can I mean, if you look at of the major moves was obviously the homegoods.com closure? I mean that was something that was significant But Ernie? Yes, I think we can Alex' direction Our expectations aren't that it would ever necessarily get there or because you have some category [indiscernible] versus a home business. On the flip side, I think our home business the way we track is probably one of the most profitable home businesses in the country or the world. At the margins we're at. If we didn't own the T. J. Maxx and Marshalls, we'd probably be saying, wow, look how high this is.

But we do, we have a higher bar to your point. So we think we'll we think part of that is the nature of some of the some of the apparel closeout businesses that are in MR Max are very profitable TJX. But our goal is to to keep pushing the needle there and trying to close the gap between the two. So I mean it's a good call out. It's hard for us to kind of look and be that firm or specific in the future on it, but good call, Thanks. I'll pass it on.

Our next question comes from Adrian Yee Great. Thanks.

Thank you very much. Can you hear me? Yes.

Okay, great.

It's music to my ears. Setting up to be textbook off price environment. So with that, my focus is really on kind of long term store growth. So you talked about kind of this incremental 1,900 that's probably about 1,800, 1,700 for each of the divisions at Marmax.

When you're going into these kind of next 800 stores, how are you selecting locations differentiate between TJX and Marmaxx And is there an opportunity even in The U. S. To do smaller footprint stores beyond that? The follow-up would be, [indiscernible] they're both joint ventures.

I remember you doing Trade Secret and buying that outright.

What's the revenue sharing model there? And what's the plan for both of those? Thank you. [indiscernible] let me talk to John and I will both jump in here. So the smaller first of all, when it comes to the stores, we take every deal separately. And John TJX involved here as well. So when we look at potential sites, We're opportunistic. We're opportunistic. We look at what other brands we see in which vicinity we measure potential transfer sales However, to your point, what we're seeing is some smaller markets and smaller footprint store, which I think you brought up when you were asking your question. We do see that So a good call We do see that as an opportunity. Because there are other areas in the country where we can put in a smaller format store which won't create too much transfer. And as you know, we've had stores, we have a store, a group of stores where we have all five brands down the street here. As you know, we've put in home sensors in their home goods, with minimal transfer sales and in some cases have actually increased our sales.

So So we're bullish on being able to add those stores in different areas Something like Sierra or HomeGoods, we were probably again as we grow in HomeGoods, we were pretty conservative in our 1,500 number, which was the more recent number. And so the teams have looked at different different locations, different demographics, population density and feel it's very realistic to go the other three stores, which is a bigger probably the biggest change that you're seeing incrementally. Right. And we added Sierra and then Spain as well to the store list.

Just to talk about your question about Brands4Less and Axo. So TJX for Less is an investment, okay, so that's not a joint venture. Axo is a joint venture. I'd say it's early days to be talking about the long term opportunities other than to say that we are very optimistic about what what that Promotive brand can do down in Mexico in the long Fantastic. Great job. Best of luck.

Our next question comes from Marni Shapiro Thank you, Marni. I'm glad you TJX. The social media was Very beneficial even though again we weren't behind a lot of So I know you weren't, but it was stunning. And then I was actively seeking it out when the algorithm wasn't feeding to me on a regular basis. It was brilliant. Two quick ones, one big one, one TJX, Can you repeat because you walked through them pretty quickly the store openings for fiscal year twenty six The globe. Yes, certainly. [indiscernible] So we've got a total of 130 net new stores.

The plan calls for 40 net new stores in Maramax, 30 stores in HomeGoods, which includes nine at HomeSense, At Sierra, we're adding 20 stores in Canada, we're adding 12 stores.

In Europe, we're adding 22 net new stores and Australia six net store openings.

Perfect.

And then, Ernie, this is kind of a bigger picture question, but I'm curious what your thoughts are here. There's been a lot of consolidation on the brand side, some that have taken the IP or have just a lot of brands within the one big company. So on that side, it's kind of the bulk of the business. And I'm curious or the bulkiness of the business, I'm curious if this is benefiting you guys as a company because you could match their size? And then conversely, on the flip side is you have so many of these much, much smaller brands that are really popping up doing well, making some noise. Is your team having success breaking into these smaller brands as well because obviously it's hard to know which one of those smaller brands is going to be the next big thing so developing those relationships early. I'm curious if you could talk about that in the market.

Absolutely, Marni. Well, first of all, both both of those situations are priorities for us and the teams. The buyers and the merchandise managers even top to top management with some of the brands that have consolidated under one house, even though they want to keep as many brands as possible because they know brands are important for them, so that they don't lose their business to the private label retailers per se. They're good at wanting to consolidate that way. We're always trying to nurture those relationships.

And they know that we're probably their best outlet to have goods in an eclectic mix non visible manner So So those relationships are actually extremely desired on both sides of the equation. For all of those obvious reasons. What you're talking about the second one is the more interesting because we salivate over that because we like a lot of new nichy, but we call them little nichy brands that keep popping up year after year, which is really what generates our our when we give you that 21,000 vendor list, it's actually it's not a stagnant list, meaning we have vendors a couple of thousand that fall off every year and then we're adding a couple thousand new every year And because we want all these new vendors typically oh my gosh, 90 plus percent of them are anxious to have us in their back pocket because they know they're relying on, say, a specialty store business and they know they're going to have X amount of leftover inventory, then they need to have a home for even though they're not big to your point, Marni. So and our buyers are trained on, we want we want to look at all desirable product, whether it's with a little vendor or a big vendor and that's what makes our treasure hunt shopping experience more exciting.

We don't want narrow vendor narrow big vendor assortments. We want eclectic mixes So that's why I love your question and that we we see that as more and more happening to your point. We often spot these little niche vendors online. TJX enough without a store.

Great. That's fantastic. I'll leave it to somebody else. Thanks guys. All right. Thank you, Bonnie.

Thanks. Our next question comes from Laura Champine Hi, Thanks for taking my question. A follow-up on the Q1 guide, just trying to get to the underlying profitability.

How much I think you mentioned that the timing of expenses I'm not sure what you said there. But if I look at the timing of the expenses and the reversal of the reserve release that year ago, what would kind of apples to apples pretax profit margin be?

So, I mean, the way to look at it is that I mean and these are these are pretty equal. We had a one time item, which is we had a CARES Act benefit last year that benefited us. So we're up against that year over year. Interest is negatively impacting us by 20 basis points as we said in the call.

We've got a timing of TJX, inventory hedge we had a benefit in Q4 that reversed in Q1. And then wage and payroll. So mean that kind of explains why we have 100 basis Okay.

Can you quantify the wage and payroll piece or talk to us about inflation you're seeing year on year just on that one line?

No, we don't get into the details of our specific TJX. But again, we see legislative increase come pretty much every January TJX.

Understood. And then, small one. So the TK Max business adding 22 stores, pretty significant step up. Any markets to call out or better real estate available there? So what's driving that?

Yes.

So the opportunities in Europe are largely in Germany. Although we do have opportunities in Austria, The Netherlands, Poland, in The UK, but in Ireland as well. But the the large majority of them opportunity is in The UK. Excuse me, in Germany TJX.

Got it. Thank you.

Our final question of the day comes from Mark Altschwager Good morning. Thank you. I don't think I heard this, but are you thinking about AUR in 2026?

And the strong mark on performance, what's driving that? How should we think about further opportunity on Marcon?

Well, again, we don't I think when we talk about the opportunity, it's a combination of what the there are a number of things that go into the benefit that we see in our gross profit, whether it comes from higher price or a better buy. So we haven't been parsing that out. And then Mark on the I think you're asking about the mark on as we look forward on the buying So the way we're looking at is, again, this environment, which as you can see, we've made healthy progress in the last couple of years. On that front. I feel as though some of those situations slow up a little bit, obviously. I think the environment right now, however, is a bit of as I said earlier, it is tech with more availability, I think heading So almost every one of the divisions that we have because of the environment. And I believe consumer confidence slowdown as well as you have again a lot of public companies are aggressive [indiscernible] because they have to grow their earnings. So no reason to believe that Our buyers aren't going to have additional opportunities [indiscernible] Get more merchandise margin as we move forward here.

The environment is just kind of set up for that. [indiscernible] So although a challenging environment overall, but those tend to work pretty well for TJX. Great. Thank you. Best of luck. Thank you, Mark. And thank you all for joining us today. We look forward to outstanding you again on our first quarter earnings call, which will be in May. Thank you.

Ladies and gentlemen, that concludes your conference call